Wednesday, 18 April 2012

OSBORNE UNDER ATTACK BY ECONOMIST WHO PREDICTED THE CRISIS

An economist who predicted the financial crisis used her speech at the Yorkshire and Humber TUC AGM to attack Chancellor George Osborne for failing to learn the lessons of history.

Ann Pettifor, who led the Jubilee 2000 campaign aimed at cancelling approximately $100 billion of debts of 42 of the poorest nations, also unveiled figures showing that when government’s cut spending, debt rises, thus destroying the basis for the coalition government’s current austerity drive that is hitting so many sections of society.

As Director of Policy Research in Macroeconomics (PRIME), Pettifor is happy to defend the political legacy of John Maynard Keynes, whose policies did much to revive the world economy in the 1930s and after the Second World War. She condemns economists who fail to see that in addition to arguing for governments to borrow and spend money to boost economic activity that Keynes “urged the need to properly regulate the financial monetary system.”

It was this failure, by governments worldwide, to do so that led Pettifor to write her book The Coming First World Debt Crisis in 2006 that showed clearly the unsustainable structure and dynamics of the global debt-based financial systems, how Third World countries were already enslaved by it and how, unless there was swift and decisive action, developed economies would be next. As we now know, Pettifor was right.

Which surely should be enough to get George Osborne to read her paper, co-written with Professor Victoria Chick, titled The Economic Consequences of Mr Osborne. Utilising statistics from the Office of National Statistics this shows, outside the two World Wars, when much of what was produced was unproductive, that when government’s spend the debt and government deficits fall. Conversely when governments spend less the debt and deficit rises.

She accuses the government of deliberately confusing the public by “pretending the economy should be run like a private household, such that individuals cut back on their spending when in debt. We have a nationalised Bank of England that can create money and Osborne did that recently when he creatively eased £50 billion into the economy, which incidentally also proved that we are not at the mercy of capital markets or foreign bankers.”

Pettifor wants to see “the deficit cut by increasing investment in sound projects such as public transport, schools and the NHS” and she believes that even the senior executives of some of Britain’s biggest companies – especially in construction - are coming round to her way of thinking. Thousands of building workers sitting idly on the unemployment register would clearly also agree.

She condemns the government for focusing on public debt, which at 62% of Gross Domestic Product is a quarter of what it was at the end of the Second World War, and ignoring “the huge volume of private debt at 500%, composed of financial, household and corporate debt and which, as it will never be re-paid, will have to be written down and needs doing so in an orderly fashion through the Financial Services Authority.”

With bad debts on their balance sheets Pettifor believes the banks “are in no position to lend money.” As a result “the restructuring needed under quantitative easing must include the creation of a public investment bank.” The question now is, are you listening George Osborne or will you continue to send Britain headlong into another economic crisis?